California pension fund opposes 'ridiculous' Elon Musk pay package at Tesla
What specific pay package for Tesla CEO Elon Musk is being reconsidered for reinstatement by the vote this week?
The specific pay package for Tesla CEO Elon Musk that is being reconsidered for reinstatement by the vote this week is the 2018 pay package. This package was struck down by a judge in January. The package consists of performance-based stock options worth roughly $50 billion. Shareholders will decide on whether to reinstate this compensation package at the company's annual shareholder meeting6.
What reasons did Chris Ailman, Chief Investment Officer of CalSTRS, provide for opposing Elon Musk's pay package?
Chris Ailman, Chief Investment Officer of CalSTRS, opposed Elon Musk's pay package for several reasons. Firstly, he believed the pay package was excessive, stating that it would pay Musk 140 times the average worker pay and calling it "ridiculous." Ailman argued that a more fair compensation would be a deal that pays Musk 140 times the average worker pay.
Secondly, Ailman expressed concerns about the valuation of Tesla's stock, which he considered to be too high. He mentioned that even with advanced artificial intelligence in the cars, the stock valuation at 60 times earnings was "absurd."
Lastly, Ailman suggested that Musk should focus more on other projects, such as SpaceX or going to Mars, implying that Musk's attention might be divided among his various ventures, and it would be better for him to let professional managers handle the day-to-day operations at Tesla.
Why did a judge initially strike down Elon Musk's 2018 pay package in January?
In January, a Delaware judge struck down Elon Musk's 2018 pay package due to its excessive nature, valuing it at $55.8 billion. The compensation package was deemed to be the largest in U.S. corporate history and was challenged by a Tesla investor, who claimed it was flawed by conflicts of interests and misleading disclosures by the electric-car company5. The judge found that the Tesla board failed to prove that the compensation plan was fair and determined that Musk's preexisting equity stake provided him tens of billions of dollars for his efforts. The ruling could potentially drop Musk from the position of the richest person in the world and strips him of the 303 million options he now holds to increase his Tesla stake.